Episode 29 Transcript
(Part 1) The Equation for Customer Success According to Gainsight w/ Peter Wride
Banoo Behboodi: Welcome to the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. I'm Banoo Behboodi and today I have the pleasure of talking to Peter Wride, the senior VP of Professional Services and Upgrades at Gainsight. Peter, welcome, I've been so excited and looking forward to our conversation.
Peter Wride: Thanks Banoo, it's a pleasure to be here. Appreciate the chance to come and chat about professional services.
Banoo Behboodi: Fantastic. You and your team have succeeded to make Gainsight a well-known brand synonymous with customer success. That is why I thought I have to have you in this conversation. So it only made sense to invite you to the show and get your perspective on professional services and how service delivery can be positioned to drive customer success. Again, as a leader within Gainsight, your best position to provide a lot of insight on this topic. So tell us a little bit more about Gainsight, if you can, to start with, and what customer success means to you. And what does it look like when you have the license to be as customer-centric as possible?
Peter Wride: So at Gainsight we help businesses build deep and lasting relationships with their customers. Over the last couple decades we've moved from where the provider had all the power and now customers have all the power. That's a phenomenal thing, but it changes from you selling one time and you walk away and you go sell to the next customer to you're constantly trying to earn their business. And so our platform allows you to be hyper customer-focused, deliver outcomes and exceptional experiences. The format for customer success or what it means to me or what it means to Gainsight, it's actually pretty simple, it's an equation. We love nerdy things at Gainsight and so the equation that we use frequently is customer success equals customer experience plus customer outcomes. So the outcome is the measurable impact. Are we actually changing what happens in your business? Can you attribute the good things happening in their business to the fact that they're using you as a vendor? Ideally, all of this is in dollars, right? Some of it might be more qualitative, but ideally they can say, because I use Gainsight or because I use X, Y, and Z software, I'm having a measurable impact on my business. Customer experience is the other part of that equation. What is it like to work with your business? And it's not, do they like you? Are you nice people? Which that's part of it, but more importantly, is it easy to work with you? Are the order forms simple, right? So this is an all-encompassing customer experience that comes across in every interaction that you have as you work with your vendor. And so if they really love working with you but they're not getting outcomes, just half the equation is correct, you get that awful call that every CS leader's gotten, which is, 'Hey, I love your team, amazing to work with you, but we're gonna have to churn.' We've all had that conversation. It's an awful one. The opposite is almost as bad, which is they get a lot of value but they hate working with you. And so they just kind of stagnate. They're not gonna go anywhere, they're not gonna get on stage for you. They're not gonna keep working, buying new products, they're not gonna upsell into new things and they just become this like, I can't wait to find a solution that will do this so I can move away. It’s kind of this hidden churn on that side as well. So the ideal is when you're having a wonderful experience and you're also at the same time getting value from the system, that's where net dollar retention comes from. That's where the opportunity comes from.
Banoo Behboodi: I love it. It seems simple, but a lot of times you hear people talking about customer experience and client experience not together with outcomes or they talk about outcomes not together. I love the formula, it's intuitive, it makes sense, but I don't think everyone's caught on, so I think it's very helpful for sure. So in that context then, how is your team structured so that you can get the absolute best results, get your clients through the outcomes and make sure that they have optimal experience?
Peter Wride: I was working at another company a couple years ago and I got the phone call. I said hey, why don't you come to Gainsight? And the most compelling thing to me about that was what would professional services look like at the customer success company? It's a super high bar and trust me, we hear it every single time we miss the bar, 'You're Gainsight, you should have known better,' right? It's my least favorite thing we say. But what I love is when people say, 'Hey, from the experience we're having with you, we're gonna steal this.' Like that's all I care about. Forget NPS and we'll talk about that more, but all I want to hear is customers wanna steal our stuff. And so on that line, I'd hate to say that I can give you the perfect structure compensation model. I think most PS leaders would probably say the following, which is one, it depends. Two, I can give you lots of bad advice on this as well cause we've all tried lots of different things, but I can share at least what we're doing at Gainsight today. We have organized in the last, we've done it for about two years now, that all of my teams are aligned to a part of the customer journey. So very simply stated, I have a team that is all onboarding. So all products report into the same leadership team for our onboardings. So if you are onboarding with Gainsight, you have the same overall leader and we're trying to simplify that methodology. Again, going back to that customer experience part of the equation, it shouldn't be when you buy two of our products that you have two different onboardings, they don't talk to each other, you're chasing down who's my CSM, what am I supposed to be doing now? It should be a very cohesive experience. And so all of those roles fall into the same leader. And then similarly on my post-live team, they all fall into the same leader. So again, regardless of what product you're using, your technical account manager or your team is providing the same updates and the same format back to you. So you have a very cohesive experience across the board. And that has its gaps, its nuances and I hear from ops sometimes it's inflexible because we wanna move people between teams more often. But this has allowed people to have what I call their major. So I'm using a college analogy, my major is onboarding, but I have a minor in TAM, in my technical account manager, right? And so they can flex back and forth, but we want them to be specialized in one. We tried again, back to that failed experiment, we had this overall pool of just technical people and some of them are good at onboarding, some are really good at TAM. They get put on the wrong projects based on availability. So pulling them apart, asking people to specialize in one or the other or one of our different functions has led to a lot of success and so that's been meaningful. On the compensation part, we're probably not too dissimilar from most services organizations so heavily on utilization so all of our ICs are 80-20 mix, so 80% base, 20% variable. And then within that 60% of that variable is tied to the utilization, another 40% is on NBO. So that's essentially the manager's flexibility to say hey, this quarter I want you to focus on NPS response rates or I want you to focus on this. And it lets them change quarter to quarter what we're incentivizing them to. But overall most of the compensation at the IC level is tied more to the utilization component.
Banoo Behboodi: That's very helpful. So I know we talked about the customer experience, it seems your structure is basically such that you can have or leak to a seamless experience for the client, right? How does it fit with the outcomes? Because there were two sides of the formula. And so how does that structure help you drive the outcome for the client?
Peter Wride: I think what it does is it helps everyone be crystal clear on what part of the outcome they're responsible for. So from prior lives, we'd finish onboarding and there were immediate ROI statements we could generate. I was able to place X many calls at an online dialer that I worked at one point. And so day one I had ROI metrics, this allows everyone to have their own part of the pie that they're responsible for and they're familiar with. So as an example, coming out of onboarding, we have documented in a success plan, here's the five things I was trying to attempt to accomplish in onboarding. I know exactly what outcomes I'm looking for and we can document that. We can say okay, I've built these workflows to accomplish A, B, and C and then CSM, here's exactly what was built, when they're gonna accomplish it, et cetera. So it allows that team to be really good at that part of the process of generating what we call against verified outcomes. In onboarding, we're kind of responsible for the genesis of them. Not for the accomplishment of them, but the identification, benchmarking and then how we're gonna accomplish them. A TAM though is very different, a TAM who's engaged with the customer after they go live is then continuing to work with them to actually accomplish them. So they're actively measuring their updating success plans, they're working with counterparts and support and CS, et cetera. And they're actually saying yes, we have accomplished this or customer, you haven't worked on NPS yet. So their job on an outcomes basis is a little bit different. They're actively in the fight, in the trenches with the customer, building out those verified outcomes and then feeding them back to the CSM, right? A CSM, guess what, we got a 40% response rate on this NPS score, make sure you bring it up at the next QBR. So we're the paid spies to help out our CSM team.
Banoo Behboodi: So customer success managers are not within your organization?
Peter Wride: No, they're not. So CS and PS as functions roll into the CCO. So my peer at the company is our VP of customer success.
Banoo Behboodi: And I'm just curious how that then fits in having a very unique PS post and pre-delivery and then a CSM. What went into that decision? Why do you think that's best practice?
Peter Wride: Gainsight, as you might imagine, has been the forebearer of CS for a long time. Not that we invented it, but we maybe helped perfect it, at least bring it to light. And I claim very little personal responsibility for that. But Nick Mehta and the community have been brought forward by that. And so Gainsight has tried on everything for size and I don't want to say that we've perfected it. I was talking to somebody this last week about 10 years ago, we were trying to make people pay for CS and I know a lot of companies do charge for CS. And so we've tried on lots of things for size. Our current structure is that we want CSMs to be focused on helping adoption and value realization from the system, not for the configuration, not for the day-to-day report building, et cetera. And so keeping that line clearly divided, it allows them to be more strategic and not get pulled into the weeds. So there's lots of resources available at Gainsight, both free and paid to help you with the weeds, but it allows a CSM to maintain this more executive relationship status. And again, tactically probably helps us with the span of control better. Because if you're asked to pull into every single escalation or every single situation, you couldn't handle as many customers. This has allowed them to be very much on the forefront of helping customers achieve value, not chasing tickets, right? And so services and support have been tasked with that. We've kept a really clear delineation from that.
Banoo Behboodi: I know you and I have discussed this, it's a continuous challenge between sales and what drives sales and sales success. Their KPIs and compensation structures and then making sure that there is some synchronization with PS. Otherwise there's that continuous head-banging that happens because there's conflict. In many organizations, that's unfortunately the structure. So how has Gainsight tried to address that? I know you talked about the compensation plan within services, how do you think that helps address that tension?
Peter Wride: One interesting anecdote, and it's not part of your official comp package, but we have an ongoing spiff program that based on what levers we wanna pull that quarter, we pay people on pretty much anything sold on services. So as a teammate on my team, I'm coming out of onboarding, I say wow, this customer could use a TAM, we'll pay them two and a half percent on that TAM or you should buy some more education. So we've enabled the team to act in their own best interest and the interest of the company to sell more services. Now that said, I like to introduce myself when I meet with our sales team, I'm a reform salesperson. I started my career in sales, did it for many years, and led sales teams. And I found this amazing world of customer success and professional services and haven't looked back. But because I've had that skill set, I spent a lot of time working in sales as part of the professional services organization. So they'd bring me onto calls, I'd help represent what services would do. I had some scar tissue from being in the trenches with other customers so I could be very relatable. And so that has been very beneficial to me personally. And I think for anyone who wants to get into a professional services leadership role, building your ability to sell is probably the top three skills that you can develop. Now that said, one of the things that we've identified at Gainsight is that that is a need across all of our new business. So I have my own sales team that reports to me, they don't report into sales. They have quotas, but I've actually trained them mostly towards selling to existing customers. So about half of all of our bookings come from existing customers buying services, renewing their TAMs, buying education, et cetera. The business is actually covered by a handful, we call them regional engagement managers. And this is a team of former project managers who I have said, you need to start helping sales. And so they're full time dedicated to selling and their job is to go in, drive confidence, put together SOWs, scope and size things and sales teams love them. They hated it when I used to give them another salesperson because they were salespeople, they don't need another person in their negotiations. But to have somebody who can say, Hey, I saw this exact same problem at another customer two weeks ago, this is what happened, this is how we solved it. And that confidence has done wonders for our ability to sell more services, bigger services with our customers. And then also because they know what questions that the team's about to ask them, they ask those questions up front and they're the human overlay. They're the warm blanket around the sales-to-service handoff. And they participate in the opening stages of any onboarding as well, they're the consistent face across it. We're capturing everything in Salesforce and Gainsight, et cetera. But there's a human being who had the conversations that can say oh, what they meant by that was A, B and C. And so there's actually a team whose job it is to be that point of connection or connectivity between the two. And that's done wonders for us that the sales team wants me to give them five more of them, but we can't quite afford that yet. It was a really good experience this last year.
Banoo Behboodi: Yeah, it's interesting that you say that because we have a similar setup at Kantata. I'm part of the advisory group and that's exactly what the role of the advisory team is. The majority of us have some context of sales but also are experts at what we do. So I think adding that to the sales process but then also the handoff I think adds a level of confidence and credibility to the process for your client. It makes them feel confident and comfortable that they're at home and they will be advised right from the beginning when they're in the sales cycle. So I agree it's a very good approach.
Peter Wride: And interesting to me over the years in doing this role personally and then seeing it is you get this weird third party benefit of the doubt because you're not a salesperson. So the customer turns to you and says, 'Well Peter or Mr. REM, is this true? Can I really be onboarded in this?' Yeah you can. 'Okay, you said I'm good.' You get this credibility just for not being a salesperson and so that has been really impactful and beneficial to our sales cycles.
Banoo Behboodi: All of that said, obviously you can't continuously improve and it looks like you are always looking for improving and optimizing your processes and structure and compensation plan. But then you've gotta have sort of a scorecard or measurement set of KPIs that you're measuring your services and delivery by. Can you tell us a little bit more about that? Because I think we're all looking for what are some of the best ways to have your pulse on the business and be able to proactively respond to challenges and issues.
Peter Wride: We measure probably what you'd expect of any semi-mature, mature professional services organization to be measuring. So effective rate, gross margins, contribution margins, utilization, productive, et cetera. And so the challenge all PS leaders have is how do I equate that to value back to the business. As a company, I want people to value my impact and sometimes it's like yep, you did your SOW check, you did this, that or the other and it feels very transactional. The service is just there to get people stood up and then there should be off and on to the next customer. And so it's like, well how do I prove that what we did was not just a financially viable way of onboarding a customer, but more importantly is leading to some increase for the company. And so one interesting anecdote and something that we measure here at Gainsight is I joined the company about five years ago and we didn't have any post-live services. We'd run into them by accident and offer them. At that point in time, 17% of all of our utilization, not our bill utilization, was free work. So again, it's only ever happened at Gainsight, no other customer's ever had this happen which is, hey services, can you come in and fix this customer? Every services leader had that question and we were saying yes and yes and yes and yes. Again, 17% of all of our team's time was spent on free work. And so we introduced the TAM model, the technical account manager is would the customer be willing to save themselves? Would they be willing to pay? And as we were mentioning earlier on the compensation side, we said, 'And CSMs, we'll give you two and a half percent of anything you sell. Well surprise, surprise, quarter one we sold $700,000 in TAM and by the end of the first year we were down to 2% of our work was free. Now we're at about 7% this year, so we kind of fluctuate back and forth, but this ability to measure the impact that the TAM could have became really critical. Because it's like okay, from a services perspective it was a great impact, we lowered our free work and generated a lot of revenue, but is it the right thing to do for the company? So what we did is we went back and looked at it and said, for companies that have purchased the TAM, and again these were primarily save plays, customers who were saying, if someone doesn't fix this for me, I'm gonna go elsewhere. What is the impact on GRR? What is the impact that our paid services are having? And this has been consistent now for almost five years. A customer who buys a TAM, so correlation causation, I'm not good enough at math to know which one it's gonna be, but a customer has a TAM is 19 points higher GRR than one without. So now I can use that to leverage back to operational processes of every customer should have a TAM. So what do we do on a procedural part to get other people selling it, et cetera. So by moving it from the abstract of effective rates and utilization and bookings to go back to the CS organization, the company at large and say hey, you should be advocating to sell more services into your customer base because you'll have a higher GRR. Your job will be easier. Your customer will get more value at a Gainsight if they're buying this offering. That's been something really useful to track and is measuring the value of our services beyond what it means for Gainsight, but also to what it means to our customers. And that's been really meaningful.
Banoo Behboodi: I'm curious, is training part of your organization and which part of that organization does training fit in?
Peter Wride: So training is under my remit overall. I have the onboarding, we call managed services, which is all post-live, education operations and sales. That education's a standalone business group within it and it's the free training in addition to paid. This can be a small group, one-to-many, it can be a custom training just for the customer as well.
Banoo Behboodi: To finish off our conversation, I know training and education is a topic of its own, but just briefly just to understand your perspective on the role of training free to some extent and then custom training. But let's say the value that you get from providing a certain level of free training to enable your clients and how downstream that impact can be. Would be interested in your perspective on that.
Peter Wride: It's hard to quantify the impact of education, but it's so meaningful when you're able to. Because it's one of those things as a SaaS company, we know that the more that people understand how to leverage our product, the more adoption there's gonna be and the sicker they're gonna be. We have a whole team as part of our education team that everything that they put out is free. All asynchronous training, webinars, certifications, et cetera. The certification itself is paid, but all the enablement to get certified is completely free. And what we found is there's a very high correlation between how certified you are and then Gainsight does an admin NPS on a regular basis and the more certified you are, the higher your NPS is and by a pretty significant number. I think it's about 30 points higher. So what we're finding is by giving people and enabling them… Again, my life, my world, my brain operates in gross margins and profitability. And so a couple years ago inheriting a completely free part for education was just like, well is that gonna be a drag on margins, et cetera. And we found enough ways to get paid offerings out there for people who want more, who want to go deeper, et cetera. But to give everything away for free pretty much in order to secure renewals. And that's the beauty. What I love about being in a PS org part of a SaaS company is that there's a higher goal than just revenue or profitability. My goal is to make the customer stick here and happy so that they are buying more renewing, et cetera.
Banoo Behboodi: And the cost of getting a new customer is significantly higher than retaining it, right? So I totally agree. Switching gears a bit, I always like to bring it to a personal level. So I wanted to finish off by asking you what it is that you're reading or recommend because I love reading and I actually look forward to hearing what people's recommendations are.
Peter Wride: One I've really enjoyed recently, and it's called Moments That Matter by Chip and Dan Heath. And it's a book with some great explanations and tactical approaches, but it's this belief that you can build peak moments and a peak moment is a moment that you'll never forget. And so you can do that for your friends, your family, your employees and I think for the context of this discussion, for our customers. And one of the anecdotes in there is that if you ask people about their college experience, everything people remember is for the month of September, you just remember your transitions or your graduation, right? But you don't remember what happened in October of your junior year, you remember your freshman year and you know you moved into the dorms. And so take that to our world, customers are really gonna remember these transition points coming into onboarding, leaving onboarding. The other interesting research is that people forget about most things. So it's actually more beneficial to build peaks than to fix potholes. And I love that saying because it’s focus on the things that are gonna be remembered and don't worry so much about the little things. Again, you have a big gaping hole in the road, you're gonna notice that, but if you actually spend more of your time building these peak moments. And so at Gainsight we have a live DJ at most of our launches, literally a guy spinning records, people dancing companies make music videos, we send them swag because they'll remember that. They might not remember the UA test script was in a format they couldn't…you know, whatever it happens to be, they're gonna forget most of that. But they're gonna remember this launch party or they're gonna remember this amazing kickoff call. And so I really love this book and it's very tactical, how do you build these peak moments? What matters in the effort to build them?
Banoo Behboodi: Fantastic, thanks Peter. And it's been a great conversation. There's so much more to discuss, but our time is up for this round. But I would love to invite you to join me for part two of the conversation.
Peter Wride: Awesome, thank you Banoo, I look forward to it.
Banoo Behboodi: Thanks for listening everyone. Join us for the next episode to get more insights from Peter and all the amazing things Gainsight is doing to revolutionize customer success. If you enjoyed this podcast, let us know by giving the show a five-star review on your favorite podcast platform and leaving a comment. If you haven't already subscribed to the show, you can do so anywhere you get podcasts on any podcast app. And to learn more about the power of Kantata’s purpose-built technology, go to Kantata.com. Thanks again for listening.